Crop prices surge to 3-year high amid heatwaves and war disruptions

Global crop prices have surged to their highest level in three years, driven by extreme heatwaves in Europe and escalating conflicts in the Black Sea and Middle East, which are threatening grain supplies and stoking food inflation fears. The Bloomberg Agriculture Spot Index, tracking 10 major crop products, hit its peak since July 2023 on July 22, marking a seventh consecutive week of gains. The rally follows earlier price spikes in May linked to disruptions from the Iran conflict, which had temporarily eased before fresh geopolitical and weather risks reignited market concerns. Wheat, soybean, and other crop prices are climbing as Russia and Ukraine intensify attacks on each other’s export corridors, disrupting grain flows just as harvests peak. Energy markets have also rallied amid Middle East tensions, while Europe’s grain harvests face severe pressure from record-breaking heat. The return of the El Niño weather phenomenon has further exacerbated fears of smaller crops, pushing futures for coffee and cocoa higher in July. “The market had up to now been relying on uninterrupted grain shipments, despite the Ukraine war,” said Mike Verdin, senior markets consultant at CRM AgriCommodities. “The latest disruption amounts to a reopening of the original wound caused by Russia’s invasion.” Chicago wheat futures extended their rally to a two-year high on July 23, surging more than 4% in the previous session as strikes between Russia and Ukraine targeted ports and ships. The two nations account for over a quarter of global wheat exports. Russian forces continued strikes on Odesa, damaging port infrastructure, while Novorossiysk, a key oil and grain export hub, imposed informal bans on nighttime navigation due to intensified Ukrainian drone attacks. Vessels were also barred from anchoring at Sea of Azov and Kavkaz ports in areas lacking air defenses. Meanwhile, renewed tensions between the U.S. and Iran have pushed crude oil prices to multi-week highs, increasing demand for biofuel feedstocks like corn and vegetable oil. Chicago soybean futures hit a two-year high on July 23, with palm oil futures in Kuala Lumpur rallying as much as 2.1%. Scorching temperatures across Europe are worsening crop losses, particularly for corn, with France—Europe’s top agricultural producer—enduring three heatwaves since late May. Record-breaking temperatures have stressed major grains during critical development stages. “That’s lifting all boats for crop prices,” said Vitor Pistoia, senior grains and oilseeds analyst at Rabobank. U.S. corn and soybean fields have also been hit by hot, dry weather, while a surge in sales to China has bolstered demand for soybeans. For soft commodities, the El Niño phenomenon has driven arabica coffee and cocoa prices higher, with both commodities on track for monthly gains in New York. The weather pattern is bringing unusually hot and dry conditions to West Africa, a key cocoa-growing region. While global grain stockpiles remain ample after recent bumper harvests, the combination of war disruptions, energy price spikes, and adverse weather is raising concerns about sustained supply chain pressures and higher costs for staples like bread, cooking oil, meat, and dairy.